PRINTER'S NO. 1208
No. 918 Session of 2005
INTRODUCED BY JUBELIRER, TOMLINSON, D. WHITE, WENGER, PUNT,
LEMMOND, BOSCOLA, ROBBINS AND WOZNIAK, OCTOBER 13, 2005
REFERRED TO FINANCE, OCTOBER 13, 2005
AN ACT
1 Amending the act of July 5, 2004 (P.L.654, No.72), entitled "An
2 act providing for taxation by school districts, for State
3 funds and for wage and net profits tax relief in cities of
4 the first class; and making an appropriation," further
5 providing for limitations and for qualifying contribution;
6 providing for public referendum to authorize limitations on
7 certain tax increases; further providing for adoption of
8 referendum and for public referendum requirements for
9 increasing certain taxes; providing for failure of school
10 district to adopt a resolution authorizing a qualifying
11 contribution; and further providing for Property Tax Relief
12 Reserve Fund.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Sections 303 and 331 of the act of July 5, 2004
16 (P.L.654, No.72), known as the Homeowner Tax Relief Act, are
17 amended to read:
18 Section 303. Limitations.
19 This chapter shall not be construed to affect the power of a
20 school district to do any of the following:
21 (1) To eliminate its occupation tax pursuant to the act
22 of June 22, 2001 (P.L.374, No.24), known as the Optional
1 Occupation Tax Elimination Act. Except for the [municipal
2 election of 2007] year in which a referendum is required
3 under section 332(e) or for an election in which a school
4 district seeks to impose a personal income tax under section
5 321(c), a school district may place such referendum question
6 on the ballot at the same municipal election as a referendum
7 question placed on the ballot pursuant to Subchapter D. If a
8 school district converts its earned income and net profits
9 tax to a personal income tax under this chapter, the school
10 district may not utilize the Optional Occupation Tax
11 Elimination Act.
12 (2) To levy, assess or collect a tax on earned income
13 and net profits under the Local Tax Enabling Act.
14 (3) To impose special purpose tax levies approved by the
15 electorate.
16 Section 331. Qualifying contribution.
17 (a) General rule.--Except as set forth in subsection (b) or
18 (c), a school district shall, by resolution, levy, assess and
19 collect the 0.1% earned income and net profits tax authorized
20 under section 321(b)(1) in order to qualify for a property tax
21 reduction allocation under section 505. The board of school
22 directors shall adopt the resolution by May 30 of the first year
23 in which a certification under section 503(a) is made. Within
24 five days after adopting the resolution, the board of school
25 directors shall notify the department in a form and manner
26 prescribed by the department in order to establish the school
27 district's eligibility to receive a property tax reduction
28 allocation pursuant to Chapter 5.
29 (b) Exception.--Subsection (a) shall not apply if any of the
30 following apply:
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1 (1) A school district which does not, prior to May 30 of
2 the year in which a school district will receive a payment
3 under section 505(b), impose an earned income and net profits
4 tax under the Local Tax Enabling Act or any other statute may
5 qualify for a property tax reduction allocation under Chapter
6 5 without levying the tax required under subsection (a) if
7 the school district proposes a referendum required under
8 section 332(e). The board of school directors shall adopt a
9 resolution proposing a referendum by May 30 of the year in
10 which a certification under section 503(a) is made. Within
11 five days after adopting the resolution, the board of school
12 directors shall notify the department in a form and manner
13 prescribed by the department in order to establish the school
14 district's eligibility to receive a property tax reduction
15 allocation pursuant to Chapter 5. If a referendum proposed
16 under section 332(e) is not approved by the electorate, a
17 district shall enact by resolution the 0.1% earned income net
18 profits tax authorized under section 321(b)(1) in order to
19 maintain eligibility for a property tax reduction allocation
20 under Chapter 5.
21 (2) A referendum proposed under section 332(d.1) is
22 approved by the electorate.
23 (c) Alternative methods of qualification.--
24 (1) (i) Within 30 days of receipt of the notice
25 required under section 505(a)(4), a school district that
26 has not adopted a resolution under section 331(a) or (b)
27 may, by resolution, levy, assess and collect the 0.1%
28 earned income and net profits tax authorized under
29 section 321(b)(1) in order to qualify for a property tax
30 reduction allocation under Chapter 5.
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1 (ii) Within five days after adopting the resolution,
2 the board of school directors shall notify the department
3 in a form and manner prescribed by the department in
4 order to establish the school district's eligibility to
5 receive a property tax reduction allocation under Chapter
6 5.
7 (2) If a school district subject to paragraph (1) fails
8 to adopt a resolution authorizing a qualifying contribution
9 under paragraph (1), a referendum shall be submitted to the
10 electors of the school district under the provisions of
11 section 335.
12 Section 2. The act is amended by adding a section to read:
13 Section 331.1. Public referendum to authorize limitations on
14 certain tax increases.
15 (a) Public referendum.--A county in which is situate a
16 school district or portion of a school district that has not
17 taken action under section 331(a) or (b) shall cause a
18 referendum question to be placed on the ballot at the municipal
19 election of 2005 to authorize the public referendum requirements
20 of section 333 for the school district.
21 (b) Notification.--No later than 30 days prior to the
22 municipal election of 2005, the department shall notify the
23 election officials of each county in which is situate a school
24 district or portion of a school district that has not taken
25 action under section 331(a) or (b) that a referendum question
26 shall be placed on the ballot at the municipal election of 2005
27 and shall also provide the county with information required to
28 complete the nonlegal interpretive statement under subsection
29 (d).
30 (c) Referendum question.--A county required to place a
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1 referendum question on the ballot at the municipal election of
2 2005 shall prepare a referendum question in the following form:
3 Do you favor limiting the (insert name of school district)
4 authority to increase property taxes beyond a rate of
5 inflation established by law, unless voters approve such an
6 increase through a public referendum?
7 (d) Nonlegal interpretative statement.--
8 (1) The election officials of a county subject to this
9 section shall draft a nonlegal interpretative statement which
10 shall accompany the referendum question in accordance with
11 section 201.1 of the act of June 3, 1937 (P.L.1333, No.320),
12 known as the Pennsylvania Election Code.
13 (2) The nonlegal interpretative statement shall include,
14 at a minimum, the following statement:
15 Public Requirements for
16 Increasing Certain Taxes
17 You are being asked to consider whether the (insert
18 name of school district) should be required to seek voter
19 approval if the (insert name of school district) proposes
20 to increase its property tax rate by more than a rate of
21 inflation established by the act of July 5, 2004
22 (P.L.654, No.72), known as the Homeowner Tax Relief Act.
23 For the purposes of this question, the rate of inflation
24 is a percentage computed annually by taking the average
25 of the percentage increase in the Statewide average
26 weekly wage and the employment cost index for elementary
27 and secondary schools, except for certain schools that
28 have a market-value/income-aid ratio greater than 0.4000.
29 For the past four school years, the percentage for
30 (insert name of school district) would have been:
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1 Year Rate of Inflation
2 2005-2006 (insert rate)
3 2004-2005 (insert rate)
4 2003-2004 (insert rate)
5 2002-2003 (insert rate)
6 By voting yes on this question, you would be voting
7 to require the (insert name of school district) to seek
8 voter approval to increase its property tax rate above
9 the established rate of inflation.
10 By voting no, you would be voting to allow the
11 (insert name of school district) to increase its property
12 tax rate by any amount without seeking voter approval.
13 Even if this question is approved, the Homeowner Tax
14 Relief Act will allow the (insert name of the school
15 district) to increase its property tax rate above the
16 established rate of inflation without voter approval if
17 certain, specific circumstances exist. For example, the
18 (insert name of the school district) would be allowed to
19 increase property taxes to pay for significant increases
20 in the cost of special education students, of improvement
21 plans required by Federal law and to maintain a minimum
22 level of revenues and expenditures. Additional exceptions
23 are included in the Homeowner Tax Relief Act.
24 (e) Certification of results.--The election officials of a
25 county shall certify the results of the referendum set forth in
26 subsection (c) to the Department of State in accordance with
27 Article XIV of the Pennsylvania Election Code. The Department of
28 State shall notify the school district and the department of the
29 certified results of the referendum as soon as is practicable.
30 (f) Referendum approval.--Approval of a referendum shall be
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1 by majority vote of the electors voting on the question in the
2 school district. If a referendum question under this section is
3 approved, the board of school directors of the school district
4 in which the referendum question was approved shall comply with
5 the provisions of sections 311, 312 and 333, beginning with
6 school district budgets and proposed tax increases that take
7 effect in the 2006-2007 fiscal year.
8 Section 3. Section 332(c)(1) and (e) of the act are amended
9 to read:
10 Section 332. Adoption of referendum.
11 * * *
12 (c) Proposed tax rate.--The proposed rate of the earned
13 income and net profits tax or personal income tax shall be
14 established by the board of school directors of the school
15 district in accordance with the following:
16 (1) For the [municipal election of 2007] referendum
17 required under subsection (e), the proposed tax rate shall
18 not be less than the rate required to provide an exclusion
19 for homestead property and farmstead property equal to 50% of
20 the maximum exclusion under 53 Pa.C.S. § 8586 (relating to
21 limitations). The proposed tax rate shall not exceed the rate
22 required to provide an exclusion for homestead property and
23 farmstead property equal to the maximum exclusion under 53
24 Pa.C.S. § 8586. In calculating the proposed minimum tax rate
25 under this paragraph, a school district shall include:
26 (i) funds generated from the tax imposed under
27 section 331;
28 (ii) funds received pursuant to a property tax
29 reduction allocation under Chapter 5;
30 (iii) funds received under section 324(b); and
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1 (iv) any funds currently collected for the purposes
2 of providing homestead and farmstead exclusions.
3 * * *
4 (e) [Municipal election of 2007] Required referendum.--
5 (1) In accordance with subsections (b) and (c)(1), a
6 board of school directors shall comply with the following, as
7 applicable:
8 (i) Where the board of school directors has taken
9 action under section 331(a) or (b). The board of school
10 directors shall propose a referendum question at the
11 municipal election of 2007.
12 (ii) Where the board of school directors has taken
13 action under section 331(c)(1) or where a majority of
14 electors in the school district has approved a referendum
15 question under section 335, the board of school directors
16 shall propose a referendum question at the municipal
17 election immediately following the approval of a
18 resolution or a referendum question under this section.
19 (2) If a board of school directors fails to propose a
20 referendum question at [the] that municipal election [of
21 2007], the school district shall be ineligible to receive a
22 property tax reduction allocation under section 505 until a
23 referendum question pursuant to subsection (c)(1) is proposed
24 in a subsequent general or municipal election.
25 * * *
26 Section 4. Section 333(a) and (f)(2)(iii)(A) of the act are
27 amended and the section is amended by adding a subsection to
28 read:
29 Section 333. Public referendum requirements for increasing
30 certain taxes.
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1 [(a) Applicability.--
2 (1) This section shall apply to a board of school
3 directors of a school district that has taken action under
4 section 331.
5 (2) For school districts under paragraph (1), this
6 section shall apply to fiscal years beginning with the 2006-
7 2007 fiscal year.]
8 (a.1) Applicability.--This section shall apply to a school
9 district as follows:
10 (1) For a school district in which a board of school
11 directors has taken action under section 331(a) or (b), this
12 section shall apply to any proposed tax rate increase that
13 takes effect in fiscal years beginning with the 2006-2007
14 fiscal year.
15 (2) For a school district in which a majority of
16 electors has approved a referendum question under section
17 331.1, this section shall apply to any proposed tax rate
18 increase that takes effect in fiscal years beginning with the
19 2006-2007 fiscal year.
20 (3) For a school district in which a majority of
21 electors has not approved a referendum question under section
22 331.1 and the board of school directors has taken action
23 under section 331(c)(1), this section shall apply to any
24 proposed tax rate increase that takes effect in fiscal years
25 beginning with the second fiscal year following the year in
26 which the board of school directors has taken action under
27 section 331(c)(1).
28 (4) For a school district in which a majority of
29 electors has not approved a referendum question under section
30 331.1 and a majority of electors has approved a referendum
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1 question under section 335, this section shall apply to any
2 proposed tax rate increase that takes effect in fiscal years
3 beginning with the fiscal year immediately following the year
4 in which the referendum question is approved.
5 * * *
6 (f) Referendum exceptions.--A school district may, without
7 seeking voter approval under subsection (c), increase the rate
8 of a tax levied for the support of the public schools by more
9 than the index if all of the following apply:
10 * * *
11 (2) The revenue generated by increasing the rate of a
12 tax by more than the index will be used to pay for any of the
13 following:
14 * * *
15 (iii) Costs associated with the following:
16 (A) To pay interest and principal on any
17 indebtedness incurred under 53 Pa.C.S. Pt. VII Subpt.
18 B (relating to indebtedness and borrowing) prior to
19 the effective date of this section. In no case may
20 the school district incur additional debt under this
21 clause except for the refinancing of existing debt,
22 including the payment of costs and expenses related
23 to such refinancing and the establishment of funding
24 of appropriate debt service reserves. An increase
25 under this clause shall be rescinded following the
26 final payment of interest and principal.
27 * * *
28 Section 5. The act is amended by adding a section to read:
29 Section 335. Failure of school district to adopt a resolution
30 authorizing a qualifying contribution.
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1 (a) Notice to election officials.--Within 60 days after the
2 deadline for a school district to notify the department that the
3 school district has taken action under section 331(c)(1) and
4 established its eligibility to receive a property tax reduction
5 allocation under Chapter 5, the department shall notify the
6 election officials of each county of the school districts in
7 that county that have not taken action under section 331(c)(1).
8 (b) Referendum question required.--
9 (1) Upon receipt of information provided by the
10 department under subsection (a), the election officials of
11 the county in which is situate a school district or portion
12 of a school district that has not taken action under section
13 331(c)(1) shall cause a referendum question to be placed on
14 the ballot at the municipal or general election immediately
15 following the receipt of the information.
16 (2) The referendum question shall be in one of the
17 following forms, as applicable:
18 (i) Where the electors of a school district have
19 approved the referendum question under section 331.1 and
20 the school district levies an earned income tax:
21 Do you favor your school district participating in the
22 alternate local tax system authorized by the Homeowner
23 Tax Relief Act? This system would do all of the
24 following:
25 (A) Increase the (insert name of school
26 district) earned income tax by 0.1% in order to make
27 the (insert name of school district) eligible for
28 property tax reduction funds from the State. Revenue
29 from the 0.1% increase in the earned income tax and
30 the property tax reduction funds would be used for
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1 dollar-for-dollar reductions in residential property
2 taxes.
3 (B) Give school district residents the
4 opportunity to approve further reductions in
5 residential property taxes by authorizing additional
6 increases in the (insert name of school district)
7 earned income tax through a public referendum.
8 (ii) Where the electors of a school district have
9 approved the referendum question under section 331.1 and
10 the school district does not levy an earned income tax:
11 Do you favor your school district participating in the
12 alternate local tax system authorized by the Homeowner
13 Tax Relief Act? This system would do both of the
14 following:
15 (A) Impose an earned income tax in the (insert
16 name of school district) of 0.1% in order to make the
17 (insert name of school district) eligible for
18 property tax reduction funds from the State. Revenue
19 from the 0.1% earned income tax and the property tax
20 reduction funds would be used for dollar-for-dollar
21 reductions in residential property taxes.
22 (B) Give school district residents the
23 opportunity to approve further reductions in
24 residential property taxes by authorizing additional
25 increases in the (insert name of school district)
26 earned income tax through a public referendum.
27 (iii) Where the electors of a school district have
28 not approved the referendum question under section 331.1
29 and the school district levies an earned income tax:
30 Do you favor your school district participating in the
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1 alternate local tax system authorized by the Homeowner
2 Tax Relief Act? This system would do all of the
3 following:
4 (A) Limit the (insert name of school district)
5 authority to increase property taxes beyond a rate of
6 inflation established by law, unless voters approve
7 such an increase through a public referendum.
8 (B) Increase the (insert name of school
9 district) earned income tax by 0.1% in order to make
10 the (insert name of school district) eligible for
11 property tax reduction funds from the State. Revenue
12 from the 0.1% increase in the earned income tax and
13 the property tax reduction funds would be used for
14 dollar-for-dollar reductions in residential property
15 taxes.
16 (C) Give school district residents the
17 opportunity to approve further reductions in
18 residential property taxes by authorizing additional
19 increases in the (insert name of school district)
20 earned income tax through a public referendum.
21 (iv) Where the electors of a school district have
22 not approved the referendum question under section 331.1
23 and the school district does not levy an earned income
24 tax:
25 Do you favor your school district participating in the
26 alternate local tax system authorized by the Homeowner
27 Tax Relief Act? This system would do all of the
28 following:
29 (A) Limit the (insert name of school district)
30 authority to increase property taxes beyond a rate of
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1 inflation established by law, unless voters approve
2 such an increase through a public referendum.
3 (B) Impose an earned income tax in the (insert
4 name of school district) of 0.1% in order to make the
5 (insert name of school district) eligible for
6 property tax reduction funds from the State. Revenue
7 from the 0.1% earned income tax and the property tax
8 reduction funds would be used for dollar-for-dollar
9 reductions in residential property taxes.
10 (C) Give school district residents the
11 opportunity to approve further reductions in
12 residential property taxes by authorizing additional
13 increases in the (insert name of school district)
14 earned income tax through a public referendum.
15 (c) Nonlegal interpretive statement.--The election officials
16 of a county shall, in consultation with the board of school
17 directors, draft a nonlegal interpretive statement which shall
18 accompany the referendum question in accordance with section
19 201.1 of the act of June 3, 1937 (P.L.1333, No.320), known as
20 the Pennsylvania Election Code.
21 (d) Certification of results.--The election officials of a
22 county shall certify the results of the referendum under this
23 section to the Department of State in accordance with Article
24 XIV of the Pennsylvania Election Code. The Department of State
25 shall notify the school district and the department of the
26 results of the referendum required under subsection (b) as soon
27 as is practicable.
28 (e) Approval of referendum.--The following shall apply to a
29 school district in which the referendum question under
30 subsection (b) has been approved by a majority of the electors
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1 voting on the question:
2 (1) (i) At its next regular meeting following receipt
3 of the certification of the referendum results, the board
4 of school directors shall adopt a resolution imposing the
5 0.1% earned income and net profits tax authorized under
6 section 321(b)(1).
7 (ii) Upon adoption of the resolution, the school
8 district shall be deemed to have satisfied the
9 requirements of section 331.
10 (2) Within five days after adopting the resolution, the
11 board of school directors shall notify the department in a
12 form and manner prescribed by the department in order to
13 establish the school district's eligibility to receive a
14 property tax reduction allocation under Chapter 5.
15 Section 6. Section 502 of the act is amended by adding a
16 definition to read:
17 Section 502. Definitions.
18 The following words and phrases when used in this chapter
19 shall have the meanings given to them in this section unless the
20 context clearly indicates otherwise:
21 * * *
22 "Eligible school district." Any of the following:
23 (1) A school district that has taken action under
24 section 331(a), (b) or (c)(1).
25 (2) A school district in which a majority of electors
26 has approved a referendum question under section 335.
27 (3) A school district of the first class.
28 * * *
29 Section 7. Section 504 of the act is amended by adding a
30 subsection to read:
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1 Section 504. Property Tax Relief Reserve Fund.
2 * * *
3 (f) Certain funds reserved.--
4 (1) Where the total amount of payments to eligible
5 school districts under section 505(b) and (c) is less than
6 the total amount calculated for all school districts under
7 section 505(a), a dollar amount equal to the difference
8 between the amount calculated under section 505(a) and the
9 total amount of payments to eligible school districts under
10 section 505(b) and (c) shall be deposited in a restricted
11 receipts account within the Property Tax Relief Reserve Fund,
12 which account is hereby established.
13 (2) Funds deposited in the restricted receipts account
14 under this subsection shall be in addition to funds deposited
15 in the Property Tax Relief Reserve Fund to comply with the
16 requirements of subsection (c) and shall not be subject to
17 the requirements of subsection (d).
18 (3) Funds deposited in the restricted receipts account
19 under this subsection shall be utilized to make payments
20 under section 505(b) to a school district:
21 (i) that has taken action under section 331(c)(1);
22 or
23 (ii) in which a majority of electors has approved a
24 referendum question under section 335.
25 (4) Funds deposited in the restricted receipts account
26 under this subsection that have not been utilized to make
27 payments under paragraph (3) within one year of the first
28 notification under section 503(d)(1) shall be available for
29 any use determined by act of the General Assembly.
30 Section 8. This act shall take effect immediately.
I22L72DMS/20050S0918B1208 - 16 -